As the Basel II process beds down it looks like it is the insurance world that is next. The replacement of Solvency I (as it is now known) by Solvency II has been set down for 2012 in the EU, with the expectation that it will be broadly followed elsewhere.
We can only hope for two things:
- They will come up with a better name for it (it lacks the ring that even a
fairly boringtown in Switzerland can bring it); and
- The US will not cock it up as badly as they have Basel II.
I know that, unlike Basel, there is no real global need to follow Solvency II, but given the globalized structure of the industry, something like this is inevitable.
I cannot claim to be too aware of insurance issues, so I will not try to pretend – but if you want to vent your own spleen or discuss the issue, go ahead.
12 July, 2007 at 20:57
I’m not as up on Solvency II as I should be, but one difference from Basel is that the risk structure of the insurance industry (particularly life) is quite different in different countries. Asset liability risk is enormous in most European countries (and nearly brought down quite a few UK life insurers) but for various reasons is a much smaller issue here in Australia.
So there isn’t the same burning need to adopt Solvency II here in Australia, but it will still probably happen eventually.
Probably a bigger issue (and closer) is IFRS for insurers – the IFRS standards when they were brought in had a big gaping hole where insurance is (everyone continued with their current methods) which is due to be solved in 2010, in a way which will (in my view) be a backwards step from Australian standards.
12 July, 2007 at 23:07
I would be interested in your views on the IFRS issue – for reasons you would be able to guess. If you could point to any resources I would like to read them.
13 July, 2007 at 21:24
Well I can suggest one of your Partners – Greg Martin – who is pretty good at that stuff.
More generally, if you’re ever in Sydney, do let me know, it’d be good to catch up and have coffee.